Analyse what effects an increase in investment might have on an economy? (13)

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1)u can write abt tht increase in investment means a low standard of living in present bt a higher standard of living in future
2) write abt future prosperity and economic growth
3) if investment is made by foreign investors into your economy then more foreign currency reserves
4) increase in investment can improve balance of payment of the country
5) investment would create more jobs ( show LRAS n demand curve)

Analyse what effects an increase in investment might have on an economy? (13)

Click to expand...

1)u can write abt tht increase in investment means a low standard of living in present bt a higher standard of living in future
2) write abt future prosperity and economic growth
3) if investment is made by foreign investors into your economy then more foreign currency reserves
4) increase in investment can improve balance of payment of the country
5) investment would create more jobs ( show LRAS n demand curve)

Click to expand...

valid points but it's missing important things.... here's my suggestion
start with the definition of investment.. then mention it is a part of AD and acts as an injection in the circular flow of national income (if you want to lengthen your ans, give brief def of injection and circular flow of national income as well)... now an increase in investment (I) has the potential of creating a positive multiplier effect which will help to increase employment, output, national income .. you can also write briefly about the accelerator effect.. that the increase in national income resulting from the initial rise in I can encourage investors to further invest... nevertheless there will a rise in NI or AD... it is important here to describe the multiplier effect and also include a diagram... this can be AD/AS one or the 45 degree line diagram....

now, a rise in AD can increase the price level causing demand-pull inflation.. (if you use the AD/AS diagram, it will benefit you here as you can support this point by drawing reference to the diagram)... again only the price can increase without any rise in output if the economy is operating in the full-employment level where the AS curve is vertical.. but then again investment also works in the AS side as well (unique feature of investment).... so if the investment is in productive sector there can be a shift of AS in the long run which will again bring down prices....